Revenue is reported from an entity's ongoing major or central activities. A gain or loss is the net result of another transaction or event. The distinction depends on the business and the transaction, not the size of the amount.
A dealership reports customer car sales as revenue and the cars' cost as cost of goods sold. If the same dealership sells a warehouse used in operations, it measures one net result from the proceeds and the warehouse's carrying amount. Reporting both amounts as customer revenue and expense would overstate the scale of its ordinary output.
ASC 360-10-40-5 links a long-lived-asset sale gain or loss to derecognition under the applicable guidance. Paragraph 45-5 keeps the result in income from continuing operations unless the disposal qualifies for discontinued-operation presentation. The transaction guidance controls measurement; the entity's presentation and applicable requirements control the caption and subtotal.
Peripheral does not mean nonrecurring. A company can sell property every year without making property sales an output of its customer contracts. A reader should preserve the net presentation and separately decide whether the pattern belongs in a forecast. If the business model changes, reassess the transaction scope rather than changing labels only to smooth an operating measure.
Apply these boundaries in the routing lesson and checked event example. The warehouse task checks the net amount and supplied placement.
Put the concept to work
Understand this concept
- Explain what separates a gain from revenue and a loss from an expense, and say why the distinction is about the activity rather than about the amount.
Apply this concept
- Compute a peripheral gain or loss net of the carrying amount of the item given up, and determine its supported continuing-operations presentation.
Analyze this concept
- Explain what a peripheral gain does to reported performance and to a reader's forecast, and identify when a recurring item has been presented as a peripheral one.
Learning resources
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Build on these ideas
- Expense — Understand
To understand this concept: Required. A loss is defined by not being an expense.
- Gain or loss on disposal — Understand
To apply this concept: Required. Asset disposal is the most common source of one.
- Operating income — Understand
To analyze this concept: Required. The judgment is about what the operating subtotal excludes.
Show 3 more prerequisites
- Peripheral gain or loss — Apply
To analyze this concept: Required. Judging the presentation requires being able to produce it.
- Peripheral gain or loss — Understand
To apply this concept: Required. Placing the item requires knowing it is peripheral.
- Revenue — Understand
To understand this concept: Required. A gain is defined by not being revenue.
Lessons
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Practice
Common mistaken ideas
Sources
Related concepts
Show 3 more related concepts
Use this idea next
- Peripheral gain or loss — Analyze
Required level here: apply. Required. Judging the presentation requires being able to produce it.
- Peripheral gain or loss — Apply
Required level here: understand. Required. Placing the item requires knowing it is peripheral.
Used in these readings
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